TMI Blog2018 (2) TMI 344X X X X Extracts X X X X X X X X Extracts X X X X ..... he purpose of business. We also note that the assessee has failed to explain before the Assessing Officer whether this amount of tax deducted at source was deposited in Government account. - Decided against assessee Disallowance of the legal and professional expenses on the ground that same was incurred in connection with issue of preference shares and thus it was in the nature of capital expenditure - Held that:- CIT-(A) has given the finding that said expenditure was incurred for issue of redeemable preferential shares to M/s Kitson PTE Ltd and though the said express was incurred during financial year 2006-07 but has been claimed during the year as liability to pay these expenses crystallised during the year. This factual finding of the Ld. CIT-(A) has not been rebutted by the Ld. counsel of the assessee. Thus, in view of the finding of the Ld. CIT-(A) that expenses are in relation to issue of share capital, same are not allowable. In our opinion finding of the Ld. CIT-(A) on the issue in dispute is well reasoned and we do not find any error in the same. Accordingly, we uphold the same. The ground of the appeal of the assessee is dismissed. - ITA No. 3614/Del/2012 - - - Date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The ground No. 2 of the appeal relates to disallowance of ₹ 5, 60, 835/-out of the legal and professional expenses. 4.1 The facts qua the disallowance are that the assessee debited provision of ₹ 49.50 Lacs to the profit and loss account and claimed as business expenditure. According to the Assessing Officer, provision made in the accounts were not an allowable deduction being unascertained liability, so he called upon to the assessee to show cause as why the said provision may not be disallowed. In response, the assessee submitted that said provision of legal and professional charges were in respect of M/s CB Richard Ellis South Asia P Ltd., M/s R P Partners and M/s Amarchand Mangal Das. The assessee further submitted that on said provision of ₹ 49.50 Lacs, it deducted tax at source (TDS) of ₹ 5,60,835/- and balance amount of ₹ 43,89,165/- was shown as liability in the balance sheet at the year end. The assessee further submitted that said liability of ₹ 43,89,165/- was written back in subsequent year and was fully offered for tax under the head other income, and therefore no disallowance is required to made in the year under considerati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usiness purposes. The payment of TDS is not an expenditure incurred wholly and exclusively for the business purposes of the appellant company. It is also seen that appellant has not issued any TDS certificate or has not clarified on behalf of the which recipient the TDS was deducted and paid. Since the TDS has been paid without incurring expenditure under any head, the same cannot be held to be a business expenditure for earning income. In view of the above the claim of TDS paid of ₹ 5,60,835/- was rightly disallowed by the ASSESSING OFFICER and the same is confirmed. 4.4 Before us, the learned counsel of the assessee filed a paper book containing pages 1 to 165 and referred page 111, which is a copy of voucher towards provision made for legal and professional expenses during the year under consideration. He Relied on the submission made before the Ld. CIT-A and also submitted that action of the Ld. Assessing Officer in disallowing only the TDS amount of ₹ 5,60,835/- was not in accordance with law. In support of his contention he also relied on the decision of the Tribunal, Kolkata bench dated 30/08/2017 in the case of Narayani Ispat private limited in ITA No. 2127 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the purpose of business. We also note that the assessee has failed to explain before the Assessing Officer whether this amount of tax deducted at source was deposited in Government account. 4.7 The decision in the case of Narayani Ispat P. Ltd. (supra) is of no assistant to the assessee as in the said case the issue before the Tribunal was that interest expenses on delayed payment of service tax was an allowable deduction or not. The issue involved in the instant case is different from the issue before the Tribunal in said case. 4.8 According to the Assessing Officer, the provision of ₹ 49.5 lakhs was an unascertained liability, however the assessee claimed that it was a ascertained liability. But this controversy is not before us as the Ld. CIT-A has disallowed the amount as not incurred for the purpose of business . In our opinion, the finding of the Ld. CIT-(A) on the issue in dispute is well reasoned and we do not find any error in the same, accordingly we uphold the same. The ground No. 2 of the appeal of the assessee is accordingly dismissed. 5. The ground No. 3 of the appeal relates to disallowance of ₹ 67,62,806/- out of the legal and professional ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Overy Shook Lin Bok on 07.01.2008 through ICICI Bank, New Delhi. The TDS of ₹ 7,64,670/- was deposited to the Govt, account. Though the expenditure pertains to issue of redeemable preference shares by the appellant company to M/s Kidson Pte. Ltd. for F.Y. 2006-07 but the liability to pay these expenses were crystallized during the year as the revised bill for payment of services was received by the appellant in November 2007 through Deutsche Bank AG, Honkong Branch. Since the liability was crystallized during the F.Y. 2007-08, the same is claimed as expenditure during the year. As regards the ASSESSING OFFICER S observation that this amount was incurred for raising authorized capital, therefore, the same is capital in expenditure. I have examined the balance sheet of the appellant which is filed at page 53 to 63 of the paper book submitted before me. On going through the same, it is seen that appellant s authorized share capital as on 31.03.2008 is at ₹ 446,41,00,000/-, which is same as shown as on 31.03.2007. In the F.Y. 2006-07, the appellant had issued 22,32,000/- commutative redeemable preference shares of ₹ 100 each and 4,24,08,000/- cumulative redeema ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tage of an enduring nature and that there was no distinction between interest paid on loan and an expenditure incurred for obtaining a loan, the expenses for issue of redeemable preference shares were allowable as deduction. The Tribunal, however, held that the amounts spent were capital in nature. On reference: Held Share capital including redeemable preference share capital could not be equated with loan or debentures inasmuch as a debenture-holder could sue a company whereas the shareholder could not. The assessee-company failed to discharge its onus of proving that the expenditure incurred was not of a capital nature. Therefore, the expenditure was not allowable as deduction. Punjab State Industrial Development Corpn. Ltd. v. Commissioner of Income-tax 225 ITR 792 (SC) Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowable as - Whether amount paid by company to ROC, as filing fee for enhancement of capital base of company can be allowed as revenue expenditure -Held, no FACTS The assessee-company claimed certain amount paid to the Registrar of Companies as filing fee for enhancement of capital base, as the revenue expendit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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